Predicting future Medicaid growth, WellPoint acquires Amerigroup

Health benefits company WellPoint announced that it reached a definitive agreement to acquire managed health care company Amerigroup. With the acquisition WellPoint said it will be able to better serve those looking for quality health care at an affordable price, particularly those with Medicaid, an area it predicts will grow in the future.

WellPoint will pay $92 per share in cash for all of the outstanding shares of Amerigroup, a value of about $4.9 billion. Following approval, the acquisition should close in the first quarter of 2013.

Once complete, the company will have the largest Medicaid enrollment base, with around 4.5 million members, and a Medicaid footprint in 19 states, said WellPoint’s chair, president and CEO Angela Braly during a July 9 conference call.

Both companies currently operate in New York, and will expand the areas in the state that they already serve.

In May, Amerigroup received final approval to acquire Health Plus, one of New York’s largest Medicaid managed care companies.

As one of the country’s top managed care companies, Amerigroup has the best Medicaid managed care platform, said Braly.

“We believe the partnership represents an opportunity to capitalize on the strengths of both companies and fundamentally meet the changing landscape in the health insurance industry,” said Maureen McDonnell, Amerigroup’s vice president of external communications.

Medicaid expansion is “unquestionable,” when looked at state-by-state, said Braly. WellPoint predicts that under managed care programs, Medicaid spending will increase by almost $100 billion by the end of 2014.

“First and foremost, there are significant growth opportunities ahead in the Medicaid marketplace, both resulting from economic, demographic, and budgetary issues, as well as health care reform,” she said.

The acquisition comes less than two weeks after the Supreme Court upheld the Affordable Care Act. Part of the decision allows for states to opt out of Medicaid, the government program that provides health care for the financially needy. But WellPoint believes that despite the court’s ruling on health care reform, Medicaid will still grow.